Fate Therapeutics, Inc. (NASDAQ:FATE) Q4 2023 Earnings Call Transcript
Fate Therapeutics, Inc. (NASDAQ:FATE) Q4 2023 Earnings Call Transcript February 26, 2024
Fate Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.45, expectations were $-0.57. Fate Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Fate Therapeutics Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors section of Fate's website at fatetherapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Wolchko, President and CEO of Fate Therapeutics.
Scott Wolchko: Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics Fourth Quarter 2023 Financial Results Call. Shortly after 4:00 P.M. Eastern Time today, we issued a press release with these results, which can be found on the Investors section of our website under press releases. In addition, our Form 10-K for the year ended December 31, 2023, was filed shortly thereafter and can be found on the Investors section of our website under Financial Information. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statement disclaimer on the company's earnings press release issued after the close of market today, as well as the risk factors included in our Form 10-K for the year ended December 31, 2023, that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, Fate Therapeutics disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.
Joining me on today's call are Ed Dulac, our Chief Financial Officer; and Dr. Bob Valamehr, our Chief Research and Development Officer. During today's discussion, we will highlight clinical milestones that we are poised to achieve in 2024 across our off-the-shelf iPSC-derived CAR NK cell and CAR T-cell programs. In addition, we will discuss our ongoing initiatives to continue the clinical expansion of our iPSC product platform into autoimmunity. Finally, we will review our financial position, where our operating discipline and strong cash balance have created the opportunity to continue our investment in developing a deep pipeline of highly differentiated preclinical and clinical product candidates, with the potential to bring significant therapeutic benefit to patients with cancer and autoimmune diseases.
Beginning with FT819, our off-the-shelf CD19 targeted CAR T-cell program. I am pleased to announce that the company has been awarded $7.9 million by the California Institute of Regenerative Medicine to support the conduct of our FT819 Phase 1 clinical trial for the treatment of patients with moderate to severe SLE. In its review of our application, CIRM scientific working group unanimously scored our application as having exceptional merit. Notably, FT819 was recognized as offering a novel therapeutic approach for the treatment of SLE with its ready-to-use supply, which can be administered to patients without apheresis and without premature discontinuation of immunosuppressive therapy. We are currently conducting study start-up activities at multiple US clinical sites, with patient enrollment set to commence at the first dose level of 360 million cells.
The Phase 1 study for the treatment of SLE is designed to evaluate safety, pharmacokinetics, and anti-B-cell activity of a single dose of FT819 administered following a standard three-day chemotherapy conditioning regimen. And we plan to share initial clinical data from the study in 2024. We also continue to enroll patients in our FT819 Phase 1 clinical trial for the treatment of relapse refractory B-cell lymphoma. This landmark study is the first-ever clinical investigation of a T-cell product candidate manufactured from a clonal master iPSC line. We are currently enrolling patients in single-dose treatment cohorts at 540 cells and at 1 billion cells using a standard three-day chemotherapy conditioning regimen. Clinical data previously presented by the company from the FT819 Phase 1 study in relapse refractory B-cell lymphoma showed a favorable safety profile and antitumor activity.
Of the first 11 patients treated with a single dose of FT819, at up to 360 million cells, we observed no dose-limiting toxicities, no events of any grade of immune effector-cell associated neurotoxicity syndrome, and mild cytokine release syndrome in only two patients. We observed antitumor activity in heavily pre-treated patients, including three complete responses, and we observed translational data consistent with known T-cell biology with CAR T-cell expansion that peaked in the peripheral blood between days eight and 11 and deep suppression of CD19-positive B cells in the peripheral blood through day 30. At the American Society of Gene and Cell Therapy Conference to be held in May, we expect to share our new data from our FT819 Phase 1 clinical trial for the treatment of relapse refractory B-cell lymphoma at these higher dose cohorts.
As well as new clinical translational data that support the potential clinical benefit of FT819 for the treatment of B-cell mediated autoimmune diseases. Turning to our solid tumor clinical initiatives, I am pleased to announce that under our collaboration with Ono Pharmaceutical, we have now initiated our Phase 1 clinical trial of FT825 for the treatment of advanced solid tumors. Patient enrollment is currently ongoing at multiple clinical sites at the first dose level of 100 million cells. We believe FT825 represents an exciting new frontier in the field of cell-based cancer immunotherapy. The multiplexed engineered iPSC -derived CAR T-cell program incorporates a constellation of antitumor mechanisms that are designed to harness the potential of both innate and adaptive immunity and to overcome the unique challenges in treating solid tumors.
These novel synthetic controls include a CXCR2 receptor to promote cell trafficking, a chimeric TGF-beta receptor to redirect immunosuppressive signals in the tumor microenvironment, a high affinity non-cleavable CD16 receptor to promote antibody-dependent cellular cytotoxicity. And a novel cancer-specific HER2 targeted antigen binding domain, which has exhibited unique and differentiated activity from that of trastuzumab. In preclinical models, FT825 has exhibited similar potency with greater specificity toward HER2-expressing malignant cells compared to trastuzumab and has shown robust antitumor activity in vitro against HER2 low expressing tumor cells. The FT825 Phase 1 study is designed to assess the safety, pharmacokinetics, and activity as monotherapy and in combination with monoclonal antibody therapy in patients with advanced solid tumors.
Including cancers where HER2-targeted therapies are approved, as well as cancers where HER2 targeting has recently shown promising clinical activity, such as endometrial, ovarian, and cervical cancers. The dose escalation schema for the Phase 1 study includes two treatment regimens. Regimen A where the monotherapy arm consists of a standard three-day preconditioning regimen and a single dose of FT825 as monotherapy. Eligibility includes patients with advanced HER2-expressing solid tumors. Regimen B or the combination arm consists of a standard three-day preconditioning regimen and a single dose of FT825 in combination with cetuximab where we seek to additionally exploit innate immunity by leveraging the product candidate's high affinity, non-cleavable CD16 receptor to target EGFR expressed on solid tumor cells.
Enrollment into regimen B will commence at the first dose level of 100 million cells upon clearance of dose-limiting toxicities at this first dose level of regimen A. Turning to our NK cell programs, FT522 is our off-the-shelf CD19 targeted CAR NK cell program and is the first product candidate emerging from our iPSC product platform that incorporates our proprietary alloimmune defense receptor technology, which is designed to reduce or eliminate the need for administration of intense chemotherapy conditioning to patients receiving cell therapies. Today, conditioning patients with intense chemotherapy is a necessary component of the treatment course for cell-based cancer immunotherapy, including for both autologous and allogeneic cell therapies.
Conditioning chemotherapy induces toxicities, limits patient access, and prevents combination with standard-of-care immunotherapies widely used in the community-based settings. FT522 incorporates a synthetic-engineered receptor targeting 41BB expressed on alloreactive immune cells. In preclinical studies, we have shown that the engagement of ADR-armed CAR NK cells with alloreactive immune cells mitigated rejection, promoted NK cell proliferation, and increased antitumor activity. These preclinical data suggest that 522 has the potential to drive clinical responses without administration of intense conditioning chemotherapy to patients. Our ongoing multi-center Phase 1 clinical trial of FT522 in patients with relapsed refractory B-cell lymphoma includes two regimens.
Regimen A or the conditioning arm, which consists of three days of standard conditioning chemotherapy, one dose of rituximab, and three doses of FT522. Regimen B or the no conditioning arm consists of one dose of rituximab and three doses of FT522 without conditioning chemotherapy. Enrollment into regimen A is ongoing at the first dose level of 300 million cells per dose and upon clearance of dose-limiting toxicities at this first dose level, enrollment into regimen B or the no conditioning arm will commence at this first dose level of 300 million cells. Each regimen may proceed with dose escalation independently. We believe we have the opportunity to establish clinical proof-of-concept for our ADR technology and for our FT522 program without conditioning chemotherapy early in dose escalation.
We will look to provide initial clinical data from our FT522 program in the second half of 2024. We also continue to enroll patients in our multi-center Phase 1 clinical trial of FT576. Our BCMA-targeted CAR NK cell product candidate for the treatment of relapsed refractory multiple myeloma. The study is currently accruing patients in three dose treatment cohorts as monotherapy as well as in combination with CD38-targeted monoclonal antibody. Using a standard three-day chemotherapy conditioning regimen, the company has treated six patients at 1 billion cells per dose with no dose-limiting toxicities and no reports of any grade of CRS or ICANS. The study is currently enrolling patients at 2.5 billion cells per dose. Any further clinical development of FT576 for the treatment of multiple myeloma will be determined by the company based on safety and activity at these higher dose levels.
As we advance these clinical programs, we remain committed to pursuing new therapeutic opportunities in autoimmunity where early clinical data with autologous CD19-targeted CAR T-cell therapy has shown profound clinical benefit. We believe there is very strong value proposition for our iPSC product platform and off-the-shelf iPSC-derived cellular immunotherapies in autoimmunity, where a relatively short-lived cell can deeply eradicate an aberrant B-cell population and enable rapid reconstitution of a healthy immune system and where safety, patient convenience, and accessibility, cost and scale will be key differentiating factors. We believe our FT819 CAR T-cell program and our FT522 CAR NK cell program have the potential to durably deplete a patient's pathogenic immune cells, drive immune reset, and meaningfully improve quality of life across a wide spectrum of autoimmune diseases.
As we look forward into 2024, we expect to expand our clinical investigation of FT819 and autoimmunity to include treatment of additional diseases beyond SLE. Additionally, we also plan to submit an investigational new drug application for FT522 in autoimmunity, where we think the potential to reduce chemotherapy conditioning and to target and deplete B cells, plasma cells, and autoreactive T-cells offers a highly differentiated therapeutic profile across a broad range of autoimmune diseases. I would now like to turn the call over to Ed to review our financial results for the fourth quarter.
Edward Dulac: Thank you, Scott, and good afternoon. Fate Therapeutics is in a solid financial position to advance our pipeline. Our cash, cash equivalents, and investments at the end of the fourth quarter were approximately $316 million. In the fourth quarter, our revenue declined to $1.7 million compared to $44.4 million for the same period last year. As described previously, our revenue is now derived exclusively from our collaboration with Ono Pharmaceutical and specifically reflects research funding associated with the development of a second product candidate against an undisclosed target in solid tumors. Research and development expenses for the quarter decreased more than 60% from the same period last year to $31.8 million.
The decline in our R&D expenses was attributable primarily to a decrease in salaries and benefits, including share-based compensation expense, following the company's restructuring in the first quarter of 2023 and from lower clinical trial costs and lower demand for R&D materials and equipment. We also benefited from $2 million of contra R&D expense in the quarter in connection with our clinical development of FT825 with Ono. As a reminder, after opting into a co-development and co-commercialization arrangement for FT825 in the US and Europe with Ono, in the fourth quarter of 2022 we account for that program's reimbursable expenses as an offset within our research and development costs. General and administrative expenses for the fourth quarter decreased by 17% from the same period last year to $17.9 million.
The decline in our G&A expenses was attributable primarily to a decrease in salaries and benefits, including share-based compensation expense. Total operating expenses for the fourth quarter declined 54% from the same period last year to $49.8 million, which includes $9.5 million in non-cash share-based compensation expense. Note that in connection with the development of our off-the-shelf iPSC-derived CAR T-cell product candidate, FT819, we previously achieved the clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, which triggered a first milestone payment to MSK in 2021. Up to two additional milestone payments may be owed to MSK based on subsequent trading values of the company's common stock ranging from $100 per share to $150 per share.
We assessed the fair value of these contingent milestone payments, currently valued at $700,000 on a quarterly basis. In the fourth quarter, we recorded a non-cash $645,000 non-operating loss associated with the change in fair value. Our net loss for the fourth quarter was $44.1 million or $0.45 per share. Finally, in what could be considered a challenging year in 2023 for the company, I wanted to recognize the resilience and collective efforts of our employees. Our cross-functional teams were able to respond to challenges, advance key clinical programs, and discover next-generation technologies and did so with efficiency. Our full-year GAAP operating expenses of $254 million compared favorably to our guidance range of $265 million to $285 million, enabling us to finish the year with more than $300 million on our balance sheet.
I would now like to open the call for questions.
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